Feel The Burn

The Bureau of Labor Statistics reported that the Consumer Price Index shot up .9% for the month of April. That my friends works out to an annualized rate of 11.35% or if you calculate inflation using the old weighting method, a whopping 12.68%. Feel the burn.

Of course they will adjust that number using what they call a seasonal adjustment to tame the number a bit, but for you and I, there is no seasonal adjustment when we pay our bills. Have you ever had the service station lower your fuel bill with a seasonal adjustment? Of course not.

The bottom line is this...the government is having a more difficult time hiding manipulation of the country's currency. In March, they stopped reporting the M3 money measure hoping that this would take some of the focus off of their continued currency inflation, but as with all economies throughout history, there comes a time when you have to pay the piper. We are approaching that time.

Reminds me of an infamous gentleman by the name of John Law. In 1716 Mr. Law convinced the French government to establish a state-owned bank. The bank then created a government currency that was unbacked. In other words, it was a fiat currency similar to our own. The French then began printing currency and using the money to pay their bills. The only problem was that it was too easy to print a few more bills when they ran short. Eventually, people became leery of the government's paper money and began turning them in for gold. The run on the bank caused the currency to collapse in 1720 and John Law went from national hero to national criminal.

Today, our esteemed leaders would have you believe that it could never happen again because this time things are different. Beware whenever anyone tells you that "this time it is different." While it is true that things are different, the end result will be the same. Our Federal Reserve Bank is systematically destroying our currency.

Why would your government destroy our currency? Well, they believe that they can manage the currency so as to prevent a total collapse. That remains to be seen. They prefer a slow steady drop in the value of our money. Why? Because if there is continuous inflation then tomorrow's dollars are worth less than today's. (We've all experienced that, right?) The government currently owes over $8 trillion dollars. That number does not include future Social Security and Medicare payments that they have promised all of us. So if the government steadily decreases the value of our money, that allows them to pay their future obligations with dollars that are worth less.

But there is another reason why the government likes inflation. You see when you own something of value, let's say equities for example, you purchase them at a set price. As inflation works through the economy the perceived value of your equities increases. It really is not the equities that are increasing but the value of the money used to buy and sell the equities that is going down in value. However, when you sell, you are taxed on the capital gains. A large portion of those gains were created out of thin air by our government's monetary policy.

So, the purchasing value of your money goes down steadily over time which causes the prices you pay to go up and you pay more taxes. The government wins both ways.

How can you defeat them at their own game? Buy gold. It protects you against fiat currency destruction and besides, they really hate for people to own gold.